In addition to certain guarantees provided by law, LegalZoom guarantees your satisfaction with our services and support. Because our company was created by experienced attorneys, we strive to be the best legal document service on the web. If you are not satisfied with our services, please contact us immediately and we will correct the situation, provide a refund or offer credit that can be used for future LegalZoom orders.

LegalZoom Satisfaction Guarantee Details:

If you're not satisfied, simply call us toll-free at (800) 773-0888 during our normal business hours. All requests made under this guarantee must be made within 60 days of purchase. We will process your request within 5 business days after we've received all of the documents and materials sent to you. Unfortunately, we can't refund or credit any money paid to government entities, such as filing fees or taxes, or to other third parties with a role in processing your order. We also cannot refund any money paid by you directly to third parties, such as payments made by you directly to attorneys affiliated with our legal plans or attorney-assisted products.

If you want to exchange the product you ordered for a different one, you must request this exchange and complete your replacement order within 60 days of purchase. The purchase price of the original item, less any money paid to government entities, such as filing fees or taxes, or to other third parties with a role in processing your order, will be credited to your LegalZoom account. Any payments made directly by you to attorneys affiliated with our legal plans or attorney-assisted products are not eligible for exchange or credit. Any price difference between the original order and the replacement order or, if a replacement order is not completed within 60 days of purchase, the full original purchase price (in each case less any money paid to government entities or other third parties) will be credited to the original form of payment. If you paid for your original order by check, LegalZoom will mail a check for the applicable amount to your billing address.

Please note that we cannot guarantee the results or outcome of your particular procedure. For instance, the government may reject a trademark application for legal reasons beyond the scope of LegalZoom's service. In some cases, a government backlog can lead to long delays before your process is complete. Similarly, LegalZoom does not guarantee the results or outcomes of the services rendered by our legal plan attorneys or attorney-assisted products. Problems like these are beyond our control and are not covered by this guarantee.

Since we're dedicating time and effort to your legal document preparation, our guarantee only covers satisfaction issues caused by LegalZoom - not changes to your situation or your state of mind.

Sole Proprietors: Are you at risk for a tax audit?

Sole Proprietors: Are you at risk for a tax audit?

Now that April 15th has passed, most small business owners are feeling the collective sigh of relief. They have dug through a year of records, found all the necessary receipts, navigated through all of that paperwork, and even filed on time. But what many small business owners do not know is that filing as a sole proprietorship could put you at risk for being audited. With any business, there are of course necessary deductions but a sole proprietorship may raise a few more needless red flags that could be avoided by running your business as a corporation. So what are those pesky red flags and how does a corporation help avoid them? Here are just a few:

The Home Office Deduction

You may be thinking - yes, yes - we all know about the home office deduction! Unfortunately, most people don't read through how the deduction actually works. Take into account that most sole proprietors work from home and you can see how trouble can brew. The home office deduction should only be taken if you use the room exclusively for business purposes. The kitchen nook that doubles as your office space is not exactly what the IRS considers an eligible office. The space must be clearly used for business purposes. Remember, only a certain percentage can actually be claimed. The other pesky issue is that all of those business deductions then have to be written on a separate form that itemizes home business expenses which can send up a red flag. On the flip side, with an S or C Corporation, you don't have to file a separate deduction form.

Schedule C

Ultimately, the problem with a sole proprietorship is that no matter what you deduct, the Schedule C form draws attention. In 2006 alone, 4 percent of all sole proprietors filing a Schedule C were randomly audited as compared to less than 1 percent of all corporations who filed either Form 1065 or Form 1120S. Why? Well, the IRS is on the look out for those business owners who hide portions of their earnings because so many people historically attempt to overstate their expenses or downplay their actual cash earnings.

Cash Based Businesses

One of the IRS's biggest concerns is the sole proprietor with a cash based business. Caterers, personal trainers, dog walkers, this means you. Many self-employed professionals tend to receive large amounts of cash that go undeclared. And unfortunately, the IRS is all too aware of that.

Understating Earnings

Another common mistake is "understating" your earnings by "overstating" your deductions and expenses on your Schedule C. And, well there is a difference between deducting a few business meals a month and deducting your weekends out with your spouse for the entire year. Again, entertaining business clients or paying for business meals may be part of your job but only a certain portion can be deducted and only under certain conditions.

The other thing you want to avoid is taking too much of a deduction on your automobile expenses. You can deduct the cost of your car if used for business purposes. That means you can either deduct the mileage at the rate of 44.5 cents per mile in 2006 or you can deduct the ordinary expenses you incur such as gas, oil changes, and parking fees. But, when you also start to deduct the cost of gas on your family road trips to the Grand Canyon or Yellowstone National Park, you may raise a few eyebrows.

Other No-No's

There are a few other areas where a sole proprietor can get themselves into a bit of trouble. One of the biggest no-no's is mingling business and personal expenses and monies in the same bank account. It makes the business look like a hobby more than a business and it makes bookkeeping infinitely more difficult.

Oh, and estimates might get you into a bit of heat as well. It is rare that you will get your meals or other deductions to equal a perfectly round number so jotting them down on a Schedule C that way can easily send up a red flag.

The Benefits of a Corporation

With a Corporation, your expenses are entirely separate from the expenses of the business. It is likely you will have a separate credit card and banking accounts where you can track business meals, gas for business, and other issues. Also, the IRS forms are consolidated and filed separately from your personal expenses because the business is a separate legal entity.

Disclaimer: Communications between you and LegalZoom are protected by our Privacy Policy but not by the attorney-client privilege or as work product. LegalZoom provides access to independent attorneys and self-help services at your specific direction. We are not a law firm or a substitute for an attorney or law firm. We cannot provide any kind of advice, explanation, opinion, or recommendation about possible legal rights, remedies, defenses, options, selection of forms or strategies. Your access to the website is subject to our Terms of Use.